House Passes Millionaire Tax Cuts

by Mike Hall, May 11, 2006

It’s a good day for the rich. They stand to get richer after the U.S. House of  Representatives on May 10 approved a $70 billion tax cut package that extends President George W. Bush’s capital gains and corporate dividend tax cuts for the rich through 2010. The U.S. Senate is expected to follow with a vote to approve the deal today. Bush, who’s never met a tax cut for the rich he didn’t like, could sign the bill as soon as this weekend.

An analysis by the Urban Institute-Brookings Tax Policy Center shows the cuts will provide an average tax cut of just $20 to Americans in the middle of the income spectrum. But those who make more than $1 million a year will get an average $42,000.

That $20 isn’t much of a trade off for the working families who will suffer from the $40 billion spending cut package in education, health and child care and other vital working family programs Congress passed and Bush signed earlier this year to help pay for the wealthy’s tax cuts.

As part of their tax cut con game, Republican leaders made sure their gifts for the rich are in the first bill and are using a second bill for other cuts they couldn’t fit under the $70 billion limit.

According to the Center on Budget and Policy Priorities:

Congressional leaders concluded they would rather use the filibuster protections that apply to a reconciliation bill to help extend the capital gains and dividend tax cuts than to extend the other expiring tax cuts, which are more popular and thus more likely to overcome any 60-vote challenge…[the bill] will increase deficits, while further widening disparities between the most well-off households and Americans of more modest means.

In an effort to draw the votes of some lawmakers who were reluctant to approve the capital gains and corporate dividend tax cuts, Republican leaders packaged the tax cuts for the rich with provisions that will keep the alternative minimum tax (AMT) from reaching down to middle-income taxpayers. The AMT was designed to make sure wealthy taxpayers paid a share of taxes, but because it wasn’t indexed to inflation, it was about to impact some middle-income families and increase their tax bill.

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